Bending The Rules Or Breaking Them?

Paul Yorke-Wade, a 47-year-old international insurance consultant based in Dublin, insists he is misunderstood. "Every time someone mentions my name, people go berserk and say, `There is the master criminal,"' the Englishman says with amusement. In fact, he says, his consulting firm simply provides a variety of routine services to his clients, including back-office support and help in sorting out disputed claims.

Insurance regulators, who are busily investigating a number of his clients, have a far different take on Yorke-Wade. To them, he is a key figure in a loose network of insurance brokers, agents, and consultants who promote the interests of questionable offshore insurers around the world. Individuals like Yorke-Wade, regulators claim, play a central role in guiding insurers to develop schemes that target thousands of small business owners, such as jewelers and motel operators, who often have trouble getting insurance. Experts say losses by policyholders could be as high as hundreds of millions of dollars every year. The companies' usual modus operandi, regulators say, is to collect premiums and then disappear

or go bankrupt, leaving substantial unpaid claims in their wake. "Any of [Yorke-Wade's] activities should receive close scrutiny," cautions Chuck Huff, the former chief investigator for the Georgia Office of Commissioner of Insurance.

Trouble does seem to follow wherever Yorke-Wade goes. Several of his clients are under investigation in Belgium, forbidden from operating in a number of states in the U.S., and defending themselves in at least 20 actions brought by irate policyholders.

Yorke-Wade insists that his activities are perfectly legal. But he acknowledges pushing the regulatory envelope: "We are here to exploit the rules." Many of his clients operate in countries with lax supervision such as Belgium, which does not regulate reinsurers at all. The companies' promoters often use regulatory loopholes or ignore insurance laws altogether to sell policies where those companies are not licensed.

Paul Yorke-Wade has spent much of his adult life learning to master the nuances of regulation. He was raised in New Zealand and Malaysia, where his father was a policeman. After finishing high school in Britain, Yorke-Wade says he joined Lloyds of London as a broker at the age of 18. He set up his own business in 1985.

Yorke-Wade first gained notoriety with a company called Victoria Insurance Co. In 1987, he helped a group of outside investors incorporate Victoria in Georgia. By the end of 1988, Victoria was in receivership, with an estimated $20 million in unpaid claims. A 1991 U.S. Senate inquiry into Victoria's failure found that the company's $1.2 million in required capital had been transferred to a London account for a company run by Yorke-Wade. That transaction effectively left Victoria insolvent.

"I AM BLACKLISTED." Yorke-Wade contends he transferred Victoria's capital to an outside firm for investment under the owners' orders. Yet he says its failure has marked him for life. "I am blacklisted by every regulator in the world," he says.

The slippery nature of the Victoria deal is echoed today in the operations of Global Insurance Co., a Uruguay-based Yorke-Wade client that also focused on tough-to-insure risks. Agents for Global sold coverage to motel owners and taxicab companies in at least five states despite the fact that the company was not licensed anywhere in the U.S. Since August, 1994, four of these states have issued orders barring additional Global sales.

Insurance agents say Global has paid on many claims. But within the past year a mounting number of customers have found it impossible to collect. Vandana Sanghvi, who came to the U.S. from India in 1972, had a Global policy on her Tuscaloosa (Ala.) motel when a fire started by a faulty lamp caused more than $260,000 of damage. But a series of Global agents and representatives told her they had no authority to pay on the claim. So last January, she took out a loan and paid for the repairs herself, largely through the motel's income. "That was the worst year of our life," recalls Sanghvi's 19-year-old daughter, Avani Gandhi.

Yorke-Wade says problems surrounding the company's unpaid claims in the U.S. are the result of shoddy underwriting by Winmill International Inc., which acted as Global's primary representative in North America. He insists that Global received less than $2 million of the roughly $18 million in premiums paid to Winmill and other agents. And he says he was only hired in August, 1994, to resolve problems at Global, which has ceased writing new policies. Winmill officials declined to comment.

SHUT DOWN. Another Uruguay-based Yorke-Wade client is Azteca Insurances. Well after Yorke-Wade began handling administrative services for the company, an agent sold insurance to a California company, contending that Azteca was exempt from state law under the North American Free Trade Agreement. "I almost got there with the NAFTA thing," says Yorke-Wade of the agent's efforts. But not quite. The insurer was shut down in three states, including California, this year for selling workers'-compensation insurance without a license.

Three other Yorke-Wade clients have stirred up even more controversy. Complaints of unpaid claims in the U.K. sparked a police investigation in Belgium into three Brussels-based companies, Dai Ichi Kyoto Reinsurance Co. and two sister reinsurers. Police raided the companies' offices in late September. One former policyholder, the Formula 1 racing team Jordan Grand Prix Ltd., is suing Dai Ichi and others for $2.5 million. The team's attorney claims that Dai Ichi owes it money on a policy that locked in income based on how it fared in competitive rankings.

Yorke-Wade argues that as a reinsurer, Dai Ichi has no direct obligation to the Jordan team. He says that any problems at Dai Ichi and its sister companies stem from problems with the previous outside consultant. The reinsurers are now winding down their business.

Authorities are currently trying to unravel the activities of Yorke-Wade and some of his clients and, they hope, eventually press charges against the companies. For now, however, Yorke-Wade will likely continue helping his clients test the regulatory bounds. "Whatever people say about me," he says, "I know the rules." That's likely to keep regulators busy for some time.

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